Clean Energy Standard (CES) Proposal Comparison Chart

A clean energy standard (CES) is a policy requiring that a certain portion of electricity generated or sold by an electric utility come from “clean energy” sources.  A well-crafted CES can  spur the deployment of clean energy technology, diversify electricity supplies, and reduce greenhouse gas (GHG) emissions from the electric power sector. Market-based provisions such as tradable clean energy certificates can minimize the costs of implementing a CES.  Thirty-one U.S. states have enacted some form of electricity standard. This brief summarizes the major provisions of recent frameworks for a federal CES.

The following table compares: an illustrative CES framework developed by the Center for Climate and Energy Solutions; the Clean Energy Standard Act of 2012, as introduced by Sen. Jeff Bingaman (D-NM) on March 1, 2012; and a request from Rep. Ralph Hall (R-TX) for the Energy Information Agency (EIA) to analyze the impacts of a CES.[1]

The three CES frameworks are similar in some respects. For instance, all three place the point of regulation on electricity utilities, and keep a federal CES distinct and separate from state electricity portfolio standards. In addition, both C2ES’s illustrative framework and Sen. Bingaman’s proposal use an emissions-based definition of “clean energy,” using supercritical coal as a baseline. From there, the three frameworks differ significantly.

C2ES’s illustrative framework allows crediting of energy efficiency up to 25 percent of a utility’s clean energy obligation, borrowing clean energy credits up to three years into the future, and an alternative compliance payment (ACP) mechanism, with revenue helping to offset electricity costs for low-income households and energy-intensive, trade exposed industries.

Sen. Bingaman’s CES proposal credits clean energy facilities placed in service after 1991, exempts small utilities, and allows electric utilities to deduct the amount of electricity sold from nuclear or hydropower facilities placed in service before 1992 from their base quantity of electricity sales. Rep. Hall’s CES model does not include any form of safety valve or allow utilities to bank or borrow clean energy credits for future use.


Policy Design

Illustrative CES Framework[2]

Bingaman’s Clean Energy Standard Act of 2012

Hall’s “Best Estimate CES” Scenario

CES Point of Regulation

Electric utilities[3]

Electric utilities

 

Electric utilities

CES Coverage

All electric utilities regardless of size or ownership

Large electric utilities in the contiguous United States.

 

Starting in 2015, utilities that sell less than 2 million MWh in the previous calendar year are exempt.[4] The sales threshold for exemptions decreases by 100,000 MWh per year until it reaches 1 million MWh in 2025. The threshold remains 1 million MWh after 2025.

 

All electric utilities regardless of size or ownership

Eligible Clean Energy Resources (Option A – Technology-focused definition of “clean energy”)

Renewables as defined in S.1462 of the 111th Congress—e.g., with respect to incremental hydropower and biomass[5]

 

New and incremental nuclear power

 

Partial credits for fossil fuel use coupled with carbon capture and storage (CCS) as function of net CO2 emissions rate

 

Partial credits for new and incremental natural gas generation that is below an emissions threshold of [800 lbs CO2/MWh] with the total credits available for such natural gas generation in any given year limited in order to spur coal-to-gas fuel switching without disadvantaging other clean energy technologies.

 

Where [800] lbs CO2/MWh is roughly the emission rate of a new natural gas combined cycle (NGCC) plant.

 

N/A

 

Eligible resources include:

  • hydroelectric
  • wind
  • solar
  • geothermal
  • biomass power
  • municipal solid waste
  • landfill gas
  • nuclear
  • coal-fired plants with carbon capture and sequestration
  • natural gas-fired plants with either carbon capture and sequestration or utilizing combined cycle technology

 Crediting mechanism:

 

Electricity Generation Type

Number of CECs per MWh of Generation

NGCC

0.5

Coal with CCS

0.9

Natural gas with CCS

0.9

Other qualified resources

1.0

 

Generation using qualified resources from either new or existing plants in any economic sector can receive credits.

 

Eligible Clean Energy Resources (Option B – Emissions-focused definition of “clean energy”)

Credits available for all generation save for non-incremental generation from nuclear, hydropower, and fossil fueled units.

 

Credits awarded based on the following formula for a generator with an emissions rate of X lbs CO2/MWh:

 

(Credits / MWh) = 1 – (X lbs CO2/MWh)/([1,700] lbs CO2/MWh)

 

Where [1,700] lbs CO2/MWh is roughly the emission rate of a new supercritical coal-fired power plant.

Clean energy means electricity generated:

  • At a facility placed in service after December 31, 1991 using –
    • renewable energy (solar, wind, ocean, current, wave, tidal, or geothermal);
    • qualified renewable biomass produced in an ecologically sustainable manner;
    • natural gas (includes coal mine methane), hydropower;
    • nuclear power;
    •  qualified waste-to-energy (energy produced from the combustion of post-recycled municipal solid waste, biogas, landfill methane, animal waste or animal byproducts, or other biomass that has been diverted from or separated from other waste out of a municipal waste stream);
  • At a facility placed in service after enactment of this Act that using –
    • qualified combined heat and power (CHP) system that uses the same energy source for the simultaneous or sequential generation for electricity energy and thermal energy; and generates at least 20% of its useful energy as electricity and 20% of its useful energy as heat[6];
    • a source of energy, other than biomass, with lower annual carbon intensity than 0.82 metric tons of CO2 equivalent per MWh;
  • Qualified efficiency improvements or quality additions means efficiency improvements or capacity additions made after December 31, 1991 to a nuclear or hydropower facility placed in service before December 31, 1991.
  • At a facility placed that captures and prevents the release of carbon dioxide (CO2) into the atmosphere.

 

Credits awarded based on the following formula for a generator with an annual carbon intensity rate of X metric tons CO2/MWh:

 

(Credits / MWh) = 1 – (X CO2/MWh)/(0.82 metric tons CO2/MWh)

 

Where 0.82 metric tons of CO2/MWh is equivalent emission rate of a new supercritical coal-fired power plant.

 

No generators are awarded negative credits.

 

N/A

Credits for Electricity Savings from Energy Efficiency

Credits issued for demonstrated electricity savings from utility energy efficiency programs (i.e., customer end-use electricity savings), and industrial efficiency, including new combined heat and power systems. 1 MWh of electricity savings earns (1- (CES % requirement)) credits.

 

Credits for electricity savings are neither tradable outside the state where the electricity savings occurred nor bankable.

 

Credits for electricity savings can be used to meet up to [25%] of an electric utility’s compliance obligation.

 

Qualified combined heat and power systems are awarded additional credits for greenhouse gas emissions avoided as a result of using a qualified combined heat and power system, rather than a separate thermal source, to meet onsite thermal needs.

Not specified.

Base Quantity of Electricity Sales

The base quantity of electricity sales to which the CES percentage requirement applies is equal to total annual electricity sales to end-use customers excluding non-incremental nuclear and hydropower generation.

 

The base quantity of electricity sales to which the CES percentage requirement applies is equal to the total annual electricity sales to end-use customers excluding nuclear and hydropower facilities placed in service before December 31, 1991.

 

The base quantity of electricity sales to which the CES percentage requirement applies is equal to total annual electricity sales.

 

 

Targets and Timetable

 

Year

Total Clean Energy Goal

2013

43%

2015

47%

2020

55%

2025

63%

2030

72%

2035

80%

 

The CES program administrator shall periodically (every [5] years) adjust future CES percentage requirements in light of any unanticipated reductions in generation from existing clean energy facilities to ensure that the total clean energy goals are met.

 

Year

Minimum Clean Energy Goal

2015

24%

2020

39%

2025

54%

2030

69%

2035

84%

 

Percentage requirement rises linearly at 3% per year, starting at 24% in 2015 and raising to 84% in 2035.

 

 

Year

Total Clean Energy Goal

2013

44.8%

2015

47.9%

2020

55.5%

2025

63.2%

2030

70.8%

2035

80.0%

 

Percentage requirement rises linearly at 1.6% per year, starting at 44.8% in 2013 and rising to 80% in 2035. Target held constant after 2035.

Banking and Borrowing

Unlimited banking

 

Limited borrowing ([3] years into the future) with “interest” against future clean energy credit streams from facilities that are under construction.

 

Unlimited banking

 

Borrowing not specified.

 

No banking.

 

No borrowing; no option to purchase compliance credits from the government. All credits are backed by physical generation.

Alternative Compliance Payment (ACP)

In lieu of clean energy credits, electric utilities can comply by making alternative compliance payments in an amount equal to [$35/MWh] in 2012 and rising at the rate of inflation plus [5%].

 

ACP revenues shall be made available to the states whose ratepayers provided them for use in furtherance of the goals of the CES—e.g., clean energy research, development, demonstration, and deployment – as well as offsetting electricity costs for ratepayers – e.g., energy intensive, trade exposed (EITE) industries and low-income households.

 

In lieu of clean energy credits, electric utilities can comply by making alternative compliance payments in an amount equal to $30/MWh (3.0 cents/KWh).

 

Starting annually by 2017, the Secretary of Energy shall increase the ACP by 5%, and adjust that for the rate of inflation as deemed necessary.

 

Any ACP revenues and civil penalties collected shall be made available to the states to fund State energy efficiency plans under Sec. 362 of the Energy Policy and Conservation Act (42 USC 6322).

 

 

Not specified.

Treatment of Existing State Programs

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 

Appropriate compliance credit granted to electric utilities for payments made to state programs (i.e., state RPS ACP payments and central procurement state RPSs (e.g., NY)).

 

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 

Federal CES is a separate and distinct program from state electricity portfolio standards.

 

Qualified clean energy facilities can earn both federal and state credits for meeting separate compliance obligations.

 


Endnotes


[1]      Sen. Bingaman’s introduced CES proposal differs from his requested EIA modeling analysis, as seen in letters to EIA, see August 16, 2011 and September 30, 2011. For Rep. Hall’s letter to EIA requesting modeling of a CES, see July 22, 2011.

[2]      Certain numeric values are bracketed. These bracketed values are suggestions and can be refined based on additional analysis or deliberation.

[3]      Here, as in congressional electricity portfolio standard proposals, the definition of “electricity utility” refers to any person, state agency, or federal agency, which sells electric energy (Public Utility Regulatory Policies Act of 1978, 16 U.S.C  2602(4)).

[4]      Clean Energy Standard Act of 2012, 112th Congress, Sec. 610(k)(3)(B) (2012). For purposes of calculating electricity sold in determining exemption, an affiliate of the electric utility or an associate company (as defined in Sec. 1262 of the Energy Policy Act of 2005 (42 U.S.C. 16451)) shall be treated as sold by the electric utility

[5]      American Clean Energy Leadership Act of 2009, S. 1462, 111th Congress, Sec. 132 (2009). Renewable energy is defined to mean electric energy generated at a facility (including distributed generation facility) from: solar, wind,  geothermal and incremental geothermal, qualified incremental hydropower, marine and hydrokinetic renewable energy, ocean (including tidal, wave, current, and thermal), biomass (as defined by the Energy Policy Act of 2005, 42 U.S.C.  15852(b)), landfill gas; and coal-mined methane, or qualified waste-to-energy sources or other innovative sources as determined through rulemaking.

[6]      The energy efficiency of a combined heat and power system shall be determined in according with Sec. 48(c)(3)(C)(i) of the Internal Revenue Code of 1986.